Brian L. Gardner and Jason R. Finkelstein | Construction Executive
A Look at Epic Systems’ Decision One Year Later
In today’s ever-evolving world of employment law, it is far from an easy task for construction industry employers to operate their business while successfully navigating all of the potential legal potholes that continue to abound and multiply seemingly with every passing day. This is particularly true in the face of the onslaught of claims lodged by current and former employees in recent years for alleged unpaid wages. While there may not be a “sure bet” way of avoiding such claims, one tool that employers should strongly consider in their arsenal are arbitration and class action waiver agreements.
To that end, last year, the United States Supreme Court rendered its ground-breaking decision in Epic Systems Corp. v. Lewis, 584 U.S. ___ (2018). In Epic Systems, the Supreme Court held that arbitration agreements containing class and collective action waivers of wage and hour disputes are enforceable. At the time of the decision, a split of authority existed among courts across the country as to whether such agreements were viable. On the one hand, several courts contended that class waivers unfairly violated employees’ rights to collectively bargain under the National Labor Relations Act. On the other hand, many other courts were finding that such agreements were fully enforceable and supported by the policies promoted under the Federal Arbitration Act. The Epic Systems Court sided with this latter viewpoint, concluding that the FAA’s clear policy promoting arbitration as a dispute resolution mechanism and private parties’ rights to freely negotiate contracts outweighed any potential arguments against such agreements under the NLRA.
With wage and hour lawsuits being filed against construction industry employers practically daily, the Epic Systems decision is critically important. Construction employers can now freely enter into arbitration and class waiver agreements with their laborers and thereby potentially limit the cost, expense and exposure of fighting such actions in a public forum on a collective or class-wide basis. To be clear, such agreements will not eliminate employees from bringing such wage and hour claims entirely, nor should the use of those agreements signal to employers that they need not make every good-faith effort to comply with their obligations under the Federal Labor Standards Act and/or any applicable state wage and hour laws. But the reality is that arbitration and class waiver agreements can work to avoid tens or hundreds or even thousands of employees from banding together in some of the massive wage and hour lawsuits being filed across the country. Instead, employers can require that those legal battles be conducted by a single plaintiff in a more controlled environment before an arbitrator (or panel of arbitrators).
As arbitration is typically a more expedited process than litigating in federal court, and parties’ discovery rights are much more restricted, the parties (both employer and employee alike) will presumably incur far fewer legal fees in arbitration than would otherwise be experienced in court. Further, by avoiding the opt-in and/or opt-out class collective/action process that is the hallmark of federal wage and hour lawsuits, savvy construction employers utilizing class waivers may ultimately avoid a significant number of claimants from joining those cases who individually lack meritorious claims, but who have hopes of collecting a portion of the class-wide judgment or settlement amount while doing nothing more than sitting on the sidelines. By forcing each employee to instead commence his/her own arbitration proceeding, that in and of itself may provide a meaningful deterrent against meritless claims while also reducing the already-overburdened court system. Such one-off claimants in arbitration may also be less appealing to certain plaintiff’s lawyers who have created a cottage industry in representing classes in wage and hour cases that often yield significant attorneys’ fees given the class and claim size.
While there was previously a lack of clarity about whether arbitration and class waiver agreements would be upheld in court, Epic Systems has provided uniformity across the country and the assurance that those agreements will be enforced nationwide if properly drafted and freely executed. While Epic Systems was only decided a year ago, more and more construction employers are integrating arbitration and class waiver agreements into their business practices. And while arbitration and class waivers may not be appropriate in all situations and may not protect against every type of claim depending on the jurisdiction (such as sexual harassment claims, by way of example), it is clear that employers, particularly in the construction industry, should strongly consider requiring their employees to execute such agreements as a condition of employment. As the saying goes, sometimes the best defense is a good offense.